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As defined by Hagen Krämer and coauthors (2023), social capitalism constitutes a “renewed social democracy” designed to achieve growth that is both inclusive (in the sense of being consistent with an equitable wage share of income) and sustainable (in the sense that it does not foster financial imbalances). These constitute narrow definitions of inclusivity and sustainability, although it should be noted that their intended economic impact is broad, the immediate ambition of social capitalism being the creation of a “rising tide (of income and wealth) that lifts all boats”—not just those of the affluent or even just those of disaffected White working-class males. Nevertheless, it is only sensible to acknowledge that the conceptions of inclusivity and sustainability noted above do not refer to the protection and/or extension of civil rights (such as voting rights and reproductive rights) or the need to reconcile economic activity with environmental constraints—much less still broader projects such as human development (on which see, for example, Auerbach and Skott 2021, 160–62).
The purpose of social capitalism is not to overlook these broader elements of inclusivity and sustainability, but instead to focus in the first instance on the achievement of labor market–centric outcomes that are essential for any regime that seeks to provide an alternative to neoliberalism: sufficiently high and steadily rising real wages and sensible working hours as an alternative to ever-increasing (and ever more “flexible”) commitments to the paid labor market coupled with ever-increasing debt. Social capitalism can therefore be thought of as necessary if not sufficient to address the ills of contemporary capitalism (which include urgent climate challenges and racial and gender inequality, among other challenges)—that is, as an important point of departure rather than a universal solution.
In the social capitalism vision, the secular decline in the wage share of income over the past three to four decades is a sign of misaligned distributional conflict between capital and labor—an imbalance of power in which workers are too weak, giving rise to the twin perils of growing inequality and the “financialization of the household.” The labor market can therefore be seen as a critical fulcrum of the triumvirate of inequality, financialization, and weak macroeconomic performance that now imperils the very social fabric of contemporary capitalism. In order to achieve and maintain inclusive and sustainable growth as defined above, several labor market–centric policy interventions are urgently required.
First, workers need sufficient bargaining power to properly influence the terms and conditions of employment—and in particular, to reverse the disconnect between real wage growth and productivity growth that has resulted in the secular decline of the wage share of income over the past 45 years. Workers already have the incentive to increase real wages at a faster pace (because wages are the primary source of income for most households). What they need (and currently lack) is the means to achieve this end—the requisite bargaining power. Various concrete and practical interventions would contribute to this end, including reversing changes in labor law that have made unionization more difficult and de-unionization easier (Block, Beck, and Kruger 1996), together with better (i.e., less pro-corporate) interpretation and administration of existing law; monitoring the institutional structure of global economic integration so that it avoids competition in labor standards between political jurisdictions and redirects the focus of globalization toward international cost competition based on productivity-enhancing technical change (Palley 2004, 2012); and increasing the minimum wage (and maintaining its real value over time) to create a higher domestic wage floor that would, in turn, provide a basis for wage negotiations outside the minimum wage sector and so empower workers more generally.
In addition, given the chronic precarity of employment in a capitalist economy, there needs to be proper support for job seekers. This requires not only adequate support for the involuntarily unemployed, but also a combination of macroeconomic policies designed to achieve and maintain full employment. Conventional expansionary monetary and fiscal policies are important in this regard, but so, too, are other schemes that might more directly target the creation or maintenance of employment. These include employer of last resort (ELR) proposals wherein, in addition to private- and public-sector employment, the government aims to provide meaningful employment in lieu of unemployment benefits (Tcherneva and Wray 2005). This is aimed primarily at those working in the private sector, where business cycles create periodic high unemployment.
The general aim of ELR schemes is to help workers avoid the manifold social and economic problems associated with unemployment but without subjecting them to “workfare”—that is, punitive unemployment insurance systems that mandate work (however meaningless) in return for benefits. Employment maintenance is also the purpose of short-time work schemes, such as the German system of Kurzarbeit—a social insurance program that enables employers to reduce working hours instead of laying off workers. In the event of a recession, a short-time work scheme both cushions household income loss and minimizes worker-firm separations. The latter works to the potential advantage of both workers and firms when general economic conditions improve, facilitating expansions of output through increases in the hours of current short-time employees rather than through costly searching for new employees.
Finally, labor market–centric policies of the type envisaged above must be buttressed by a renewal of the welfare state. Propagation of anti-welfarist sentiment is part of the original neoliberal capital-citizen accord described by Houston (1992). An important component of social capitalism involves both (a) countering rhetoric designed to misrepresent the welfare state as nothing more than a collection of disincentives to work that advantage only a minority of idlers and (b) revitalizing public provision of and access to vital social services—such as healthcare, education, and childcare—that, in fact, make the welfare state a collection of vitally important “ladders” to economic prosperity and upward social mobility.
Social capitalism so described bears comparison to the concept of social democratic liberalism recently advanced by Geoffrey Hodgson (2021), with respect to both the organization of the economy and the organization of civil society. With respect to the former (and as is implicit in what has been said so far), social capitalism envisages continued reliance on core capitalist institutions such as private property and markets, enhanced by state intervention designed to supplement and guide the workings of these institutions in the pursuit of the common good. In short, the guiding vision of social capitalism is that capitalist forces of production should be—indeed, need to be—embedded in a suitable social structure (i.e., relations of production) in order to make capitalism “social” in the sense that, in the first instance, it provides material prosperity and security for all.
As regards civil society, meanwhile, social capitalism rests on the primacy of representative democracy coupled with the protection of individual rights, but without assuming individuals are (or should be) devoted only to their own self-interest. Here the inspiration is the “moral sentiments” described by Adam Smith, which put the pursuit of economic self-interest into a broader social context based on respect for the rights of others, a sense of duty to collective causes, and acknowledgment of the importance of cooperation and coordination with other individuals and communities. This is a civil society in which liberty is seen not as a “negative” concept (involving only the absence of constraints on individual behavior), but as a “positive” concept—a society in which, for example, a formal law requiring drivers to “keep right except to pass” is understood as liberating, because by denying the choice to drive anywhere on the road it coordinates many individual decisions and, in so doing, facilitates road transportation in a manner and to an extent that would otherwise be impossible.
As noted, the narrow definitions of inclusivity and sustainability the concept embraces mean that social capitalism as outlined here is not a panacea. But to the extent that it addresses the neoliberal degradation of labor market conditions—which is arguably the ground zero of macroeconomic and social malfunction under neoliberalism—it constitutes not just a valid but, perhaps, an essential point of departure for any more expansive and genuinely post-neoliberal project.
This is an excerpt from an essay first published in Social Research: An International Quarterly in the journal’s Fall 2024 issue, Challenges to Democracy and the Future of Capitalism.
